Broadcom Learns From Prior Quarter Mistakes (BRCM)

Broadcom Corp. (NASDAQ: BRCM) posted Q4-2007 non-GAAP earnings of $0.34 diluted EPS, up from $0.27 in Q3-2007 and up from $0.31 in Q4-2006. Revenues were $1.027 Billion, up 8.1% from the $950.0 million reported for Q3-2007 and up 11.2% from the $923.5 million reported in Q4-2006.  First Call had consensus estimates at $0.32 non-GAAP EPS on $1.02 Billion in revenues.

The company noted that net revenue for the Q4-2007 does include royalties of $31.8 million from a patent license agreement entered into in July 2007, so we’ll have to see in the morning if analysts are critical of the top-line number with this in it.  As that $40-ish average target is so much higher, we won’t be too surprised if current ratings from analysts are maintained but with a slight lowering of their 12-month price targets for the shares.

Broadcom noted that that Bluetooth, wireless LAN. and digital TV will continue to be key revenue drivers for 2008; and it looks forward to the emergence of new product areas in HD DVD, cellular and GPS, and within its traditional end markets in switching and set-top boxes.

This one has been just crushed since last earnings and has been cut in half from highs.  This stock was crushed  by some 20% after its prior earnings report as a result of higher and aggressive R&D spending at the expense of Earnings Per Share.  It looks like the company learned a lesson from it.  Scott McGregor, President & CEO noted:

• "While Broadcom will continue to invest to bring these and other new products to market, we have tightened our processes and made additional strategic portfolio management decisions in the fourth quarter to help moderate expense growth across 2008, with the goal of trending back towards our long-term business model."

Until the forward data is available in the conference call, this still has to be considered a work in progress.  Shares rose more than 6% today to $22.48, and that is almost a 10% turnaround from the lows seen just yesterday.  Shares are currently up another 3.5% to $23.28 in after-hours trading.

Jon C. Ogg
January 24, 2008